At Liquid Friday, we recently held a webinar on umbrella regulation, specifically the impending introduction of Joint & Several Liability. The turnout and level of engagement made it really clear that agencies want to understand exactly what they’re up against as this change approaches.
If you missed it, you can watch the full recording below:
What we covered
In the course of this informative session, Liquid Friday’s CEO, Colin Gunnell, and Head of Technical Operations, Lewis Gosling, covered the following aspects of the reform in terms of the impact they will have on recruitment agencies.
- What is JSL and why it matters
- New Chapter 11 of ITEPA
- Definition of umbrella company and purported umbrella company
- Supply chain transparency Where agencies are most exposed Common misconceptions about JSL
- What good looks like
- Things worth caring about
- Reviewing your umbrella relationships
- What we are seeing in the market
- How Liquid Friday can help
Live Q&A – the questions agencies are asking
One of the most valuable parts of the session was the live Q&A. A few themes came through very clearly.
“We already undertake due diligence on our umbrella PSL. Will that be enough?”
Historically, robust due diligence – backed by strong contractual protections – was a solid way to mitigate supply chain risk. If you could demonstrate you had taken reasonable steps, that gave you a strong line of defence. Under Joint & Several Liability, that position changes significantly.
JSL operates as a strict liability regime. Liability does not depend on fault, negligence or intent. Even if you carried out thorough due diligence, selected an accredited provider and acted in good faith, if PAYE or NIC hasn’t been paid, HMRC can still pursue you for the shortfall. So yes, due diligence remains important. It absolutely still needs to be done. But it is no longer enough on its own.
The critical issue now is whether PAYE has been accurately calculated, deducted and paid to HMRC – every single month, across 100% of your contingent workforce. Protection is no longer just about having the right paperwork on file. It’s about transparency, verification and ongoing oversight.
“How often should we be auditing our umbrella companies?”
In the past, an annual audit might have sufficed. Under JSL, that mindset needs to shift. The answer is not “once a year” — it’s continuous oversight. Every month you should be confident that:
PAYE and NIC have been paid on time to HMRC
RTI submissions have been made correctly
You could verify this if challenged
JSL is tied to actual tax payments, not process intentions. That means your assurance needs to reflect that reality.
“How many umbrella companies should be on our PSL?”
This ultimately comes down to what your agency can properly oversee.
The due diligence and verification process is now more detailed and more resource-intensive. Large PSLs with 20–30 providers may look attractive from a “choice” perspective — but they significantly increase administrative burden and monitoring risk.
Many agencies are reassessing whether a smaller, well-managed PSL — where relationships are strong and oversight is meaningful — offers better protection and control.
“Who will HMRC come after first?”
HMRC’s priority is recoverability. They will pursue the party they believe offers the easiest route to recovering the debt in full. This will usually be agencies first because they have a UK presence, turnover, assets and insurance. Many small or non-compliant “dodgy” umbrella companies won’t have any of these. End clients become targets where no genuine umbrella company exists in the supply chain.
But ultimately, under Joint & Several Liability, HMRC doesn’t have to pursue parties in order. They can pursue whichever party they believe is most likely to settle the debt. That’s why agencies need to understand their exposure now.
How Liquid Friday can help
JSL doesn’t need to be alarming, but it does need to be understood. If you can demonstrate that liabilities are being calculated correctly, deducted correctly and paid to HMRC correctly, you have a clean supply chain, and peace of mind.
If you’re still working through what JSL means for your agency, we’ll be very happy to talk it though with you. We also work closely with agency partners to review supply chain structures and identify areas of potential exposure before they become issues. Preparation now will always be better than reaction later.
